I thought it might be interesting and educational to determine what Webmasters/Publishers and Merchants think about the current state of the net economy and when we will see a significant correction.

IMHO, you can't run a business without a "plan" and a clear understanding of what your revenue is today and what factors will influence your revenue in the future. Income and expenses which you can control and or optimize and other factors which you can't control.

Please only vote once. Please tell us why and when you think the correction will occur in a given quarter/year and what "indicators" support your theory.

Definitions for a Q (a calendar quarter):

Q1 - January through March
Q2 - April though June
Q3 - July through September
Q4 - October through December

Edit of 2-16-02 (Thanks)

Significant correction: Each of us may have a slightly different view on what this term means. If we equate site revenue to CPM then perhaps a return to the days of a $2.00 CPM for an entertainment site or a pre tax net income for a Company which resembles the 1999-2000 levels. If we agree that an average CPM is 0.50 in a given space and it improves to 1.00 over an extended period of time, then that would be a significant correction.

Net Economy: Each of us may use a different revenue model. Your own perspective from your own site or Company. I'm trying to determine how each revenue model is performing on a given type of site or Company and stimulate some "big picture" thinking.

Your Help: If you have a suggestion for a new Poll, please only use our BB Feedback Form and send me your ideas and details. Some of our best Polls come from members, so your comments are always appreciated.

I think you need to define two terms before I can give a meaningful answer:

correction - typically this term is applied to a moderate decline in stock prices (say 10-20%) after they've had a big run up. I'm guessing you mean something quite opposite. We've had a major "correction" since mid 2000. Also known as a recession.

net economy - do you mean merchandise sales or ad sales or both or neither? Ad rates have severely declined in recent years of course but a number of merchants have seen a big increase in merchandise sales.

The Internet is the cheapest medium to advertise on at the moment. My friend owns a travel web site (commision on hotel bookings), and recently spent £3000 on advertising in a magazine as an experiment, he received zero bookings from this. That cost was for a full page advert in a general weekly entertainment magazine. He is just kicking himself at the wasted money. I understand the Internet would be more targetted for this kind of advertising, but the fact a magazine is able to charge so much for a full page advert, leads me to believe that conservative advertising mediums such as TV, Radio, paper will have to decrease in cost and Internet will slightly increase.

They may never reach those standards but they must improve, mustn't they?

I think the market is very healthy, just different.

For example, I believe per-sale opportunties are at least as strong as they ever were. Some other types of opportunities (like CPM based banner advertising) are almost certainly not once they once were.

If I was to guess

I think that Per-sale (and some per-lead programs) will continue to improve as there is increased competition for affiliates who actually deliver sales

I think that CPMs across the board will not go back. I think that advertisers will be looking for smarter ways to spend their money, either by more sophisticated targetting, by deeper integration into web sites, being more selective on where to spend the money etc.

I think that the 1999 market was unique, because (1) you had a huge venture capital bubble supporting it, (2) many companies with apparently no immediate desire to make a profit but a rather a desire to build their name in anticipation of a future hockey-stick effect, (3) compared to now, probably less sites and surfers to pursue, and (4) a whole bunch of web surfers who had not become relatively immune to banner ads and had not learned how to close popups in microseconds. Frankly I would be surprised (but not at all upset!) if any of the subsequent trends reverse themselves.

I think what you currently see is what you'll get. CPMs prices won't raise. CPAs won't raise. CPS won't raise. CPC won't raise.

What you will see is more companies online, more varied CPA & CPS offers, but none really making you much more than the other. You'll just have a bigger variety to pick from.

Hate to sound bleak, but get used to the way things are, at least for the next long while. There's no reason for tons of ad cash to flood back into the Net when the stock market improves. Look at all the DOT COMs that went bust. A huge chunk of the cash spent (and lost) on advertising in the middle 90's was a mistake that probably will not be repeated again.

There's also the whole Market & Demand concept. There's currently WAY too many ad spots available (market) for the number of advertisers (demand), plus more and more available ad spots are coming online too, and that just lessens demand.

The only time I expect to see a significant improvement in online ad prices is when the Net catches up with TV as a branding vehicle, and even then the prospect is only so-so. When online technology catches up with TV, I can possibly see it as the cause of dropping TV ad prices and not a price increaser for Net ads.

Of course I might be wrong and next week we'll be selling 468x60 banner ads for $106 CPM.

My guess and you might want to fasten your hard disk before you read any further

It's going to get worse before it gets better. Another 2 years before we see a significant correction which will never ever approach what we experienced in 99-20. Those days are gone and will never return.

1. Yahoo free email is a sign for me and numerous other free email sites will vanish. Too much investor pressure for big Y to continue a free service. More will fail before we hit bottom.

2. Free web site services will vanish. Some may be used as loss leaders for "hosts" but the brutal truth is that folks that want free sites don't buy and always want more free stuff. Many more will fail before we hit bottom.

3. We will continue to see "desperation" on the part of Publishers and Merchants. Rather than just close shop they will forever tarnish their reputation and compromise their ethics. Some of these tactics might work on other forums or eBay but geek/talkers are much to smart for this.

4. Communities of any ilk are under even more pressure. Many more will fail and evaporate or scale back to a paid service. You and I may not like this but IMHO expect a lot more to fail before we hit bottom.

5. Webmasters, if you want to set up your "lemonade stand" on the corner and compete you need to adjust your expectations. Plan on not making any money and paying all your costs from your own funds. For many, your time would be better spent working for someone else and learning the tricks of the trade.

6. New merchants will continue to arrive in an attempt to exploit the desperation of some Webmasters. Please don't cry in your beer if you didn't thoroughly read the TOS and actually examine the service before you signed up. Know more than ever before, you need to do your "due diligence"

7. The effect of the "Enron" failure is just starting to affect some publicly traded stocks in our sector. More will be toast and adjust earnings as legislation and review will forever change "creative accounting" When this runs it's course we will have hit bottom.

In closing, there will be rare exceptions in every imaginable space and circumstances but those will be few and far between. Good luck to all of you

One thing which will probably change going forward is the reduction in the percentages ad networks keep. Currently, ad networks keep 40% or more of the revenue. The internet is the only ad medium where the ad network keeps the lion's share of the money. If ad network commissions decrease to fall in line with other media, publishers should see a corresponding increase in their revenue.

Quote:

Old media precedents aren't encouraging. Historically, national advertising representatives for newspapers retain only 15% of ad sales money as a commission, says newspaper industry consultant John Morton. Average rep commissions of 15% are a distant memory in broadcast advertising, says Gordon Hastings, former president of ad rep powerhouses Katz Television and Katz Radio; TV averages fell to 10% in the 1970s, and radio fell to 11% in the 1990s. TV commissions have since fallen farther -- according to anecdotal evidence, they are now close to 5%.

Originally posted by Steve_S
It's going to get worse before it gets better.

I couldn't agree more.

Before Steve edited his opening post to clarify that "correction" in this context suggests a move in the positive direction, I had voted for Q2 2002 as a negative correction to offset the mini-booms experienced by a few of the more promising net stocks.

IMHO, we're going to see a W-shaped recovery, and are in the middle presently. Stocks such as Amazon (which was buoyed significantly by a tiny profit induced in part by favorable - read: lucky - currency exchanges and largely by the Christmas shopping fest), INT Media and Snowball (boosted out of penny-stock status for operating the largest independent Xbox site on the net), will be hit hard after releasing their 1st calendar quarter results, and former direct-marketing darlings such as the PPCSEs are already being devalued as investors realise that although they have sustainable business models and solid growth prospects, marketers will allocate increasingly large chunks of their online budgets to interstitials, mini-sites, banners, contests, coupon promotions and other branding-centric techniques as the real recovery draws imminent.

New accounting laws regarding the immediate writing down of bad investments will hit the big media companies and acquisition-hungry players such as AOL and Yahoo where it hurts, while Enron's collapse will take sizeable chunks out of the balance sheets of many of the big banks, fund managers and commodity traders - and it could still hurt the Bush team once trials heat up, even with possible witness J Clifford Baxter now out of the picture. The scrutiny surrounding Enron will also force other companies who keep lossy operations under the annex of off-balance sheet companies to rethink the longevity of that strategy, and may thus bring losses back into the spotlight.

Not to mention that US stocks in general are still overvalued by world standards in terms of PE ratios, suggesting that if the growth expectations already factored into the market don't come to bare quickly, the major US indices will likely register big losses. This, added to the successful roll-out of the Euro and promising growth prospects in downtrodded Japan and SE Asia for 2003+ could see investors and fund managers move their focus to the foreign markets until things normalize Stateside.

Online, free hosts (and many ultra-budget hosts) will largely dry up, with a few stayers hanging around to pick up the pieces, and ad networks will continue to increase their competition for branded properties while leaving smaller indies on their own. This will additionally pressure indies to quit and publish newsletters, further their education or find traditional employment instead.

Email marketing will be squeezed as spam increases. Already, I receive about 300-400 spam messages a day, and it will be only a matter of years until the average AOL newbie is also subjected to this type of onnslaught, which will put email marketers such as NetCreations, YesMail and DoubleClick in an unenviable position of trying to cut through the clutter with technology and legislation lobbying.

Basically, I expect the consolidation to continue amongst the big players, and for smaller entities to either develop non-media interests or leave the net scene entirely. There will always remain hobbyists, but the gap seperating them from the big boys will increase.

Anyway, I know this has been a little pessimistic, but there are few indicators to suggest otherwise. Throughout the entire process, though, opportunities will exist, and as many Geek/Talkers have demonstrated during the past year, small and dynamic outfits will be able to profit from the emerging trends if they can handle the competition.

I'm remaining optimistic. I do agree the days of free are soon over - however consumers will soon finally realize free isn't what it's used to be - and start actually paying for what they use in all areas (only if they are forced out of other options).

It still pays to have a large userbase and advertising eyes - and I would rather have that now and hold out until things get better. It may weed a few out and change the market - but that's the same way with anything that people start jumping in on - and only the tough and smart will pull through

My advice is don't drive yourself too nuts - just have some fun and eventually it will work out - because if you do things for the right reason which is supporting the users and helping people - rather than pound them with offers that they don't want- eventually you will get the loyalty and maybe they would be willing to pay for a decent service.

On the contrary - I think we'll see a small decrease in anything that isn't either per sale or paid according to sales ratios.

("Low-value" lead programs, contests, freebies and such will continue to decrease, I think - mostly because email marketing will become less effective (per subscriber) because of all the spam and savvier internet users.)